Fundamental Accounting Principles 20e Chap001

1、PowerPoint Authors:Susan Coomer Galbreath, Ph.D., CPACharles W. Caldwell, D.B.A., CMAJon A. Booker, Ph.D., CPA, CIACynthia J. Rooney, Ph.D., CPAChapter 01ACCOUNTING IN BUSINESSMcGraw-Hill/Irwin Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.1 - 2IdentifyingSelect transactions

2、and eventsRecordingInput, measure and classifyCommunicatingPrepare, analyze and interpretIMPORTANCE OF ACCOUNTINGAccountingC 11 - 3USERS OF ACCOUNTING INFORMATIONExternal UsersLendersShareholdersGovernmentsConsumer GroupsExternal AuditorsCustomersInternal UsersManagersOfficers/DirectorsInternal Audi

3、torsSales StaffBudget OfficersControllersC 21 - 4External UsersFinancial accounting provides external users with financial statements.Internal UsersManagerial accounting provides information needs for internal decision-makers.C 2USERS OF ACCOUNTING INFORMATION1 - 5OPPORTUNITIES IN ACCOUNTINGC 21 - 6

4、ACCOUNTING JOBS BY AREAC 21 - 7Beliefs that distinguish right from wrongAccepted standards of good and bad behaviorETHICS - A KEY CONCEPTC 31 - 8C 3ETHICS - A KEY CONCEPT1 - 9Financial accounting practice is governed by concepts and rules known as generally accepted accounting principles (GAAP).GENE

5、RALLY ACCEPTED ACCOUNTING PRINCIPLESRelevant InformationAffects the decision of its users.Reliable InformationIs trusted by users.Comparable InformationIs helpful in contrasting organizations.C 41 - 10The Securities and Exchange Commission is the government agency that establishes reporting requirem

6、ents for companies that issue stock to the public.SETTING ACCOUNTING PRINCIPLESThe International Accounting Standards Board (IASB) issues International Financial Reporting Standards that identify preferred accounting practices to create harmony among accounting practices of different countries. C 41

7、 - 11INTERNATIONAL STANDARDSThe International Accounting Standards Board (IASB), an independent group (consisting of 16 individuals from many countries), issues International Financial Reporting Standards (IFRS) that identify preferred accounting practices.C 41 - 12INTERNATIONAL STANDARDSC 41 - 13PR

8、INCIPLES AND ASSUMPTIONSOF ACCOUNTINGCost PrincipleAccounting information is based on actual cost. Actual cost is considered objective.Revenue Recognition PrincipleRecognize revenue when it is earned.Proceeds need not be in cash.1. Measure revenue by cash received plus cash value of items received.

9、Matching PrincipleA company must record its expenses incurred to generate the revenue reported.Full Disclosure PrincipleA company is required to report the details behind financial statements that would impact users decisions.C 41 - 14ACCOUNTING ASSUMPTIONSMonetary Unit AssumptionExpress transaction

10、s and events in monetary, or money, units.Business Entity AssumptionA business is accounted for separately from other business entities, including its owner.Time Period AssumptionPresumes that the life of a company can be divided into time periods, such as months and years.NowFutureGoing-Concern Ass

11、umptionReflects assumption that the business will continue operating instead of being closed or sold.C 41 - 15FORMS OF BUSINESS ENTITIESSole ProprietorshipPartnershipCorporationC 41 - 16* Proprietorships and partnerships that are set up as LLCs provide limited liability. CHARACTERISTICS OF BUSINESSE

12、S*C 41 - 17Owners of a corporation are called shareholders (or stockholders). Shareholders are not personally liable for corporate acts. When a corporation issues only one class of stock, wecall it common stock (or capital stock).CORPORATIONC 41 - 18SARBANES-OXLEY (SOX)Congress passed the Sarbanes-O

13、xley Act to help curb financial abuses at companies that issue their stock to the public. Management must issue a report stating that its internal controls are effective. Auditors must verify the effectiveness of internal controls.C 41 - 19TRANSACTION ANALYSIS AND THE ACCOUNTING EQUATIONAssets=Liabi

14、lities+EquityAccounting EquationA 11 - 20LandEquipmentBuildingsCashVehiclesStore SuppliesNotes ReceivableAccounts ReceivableASSETSA 1Resources owned or controlled by a company1 - 21Taxes PayableWages PayableNotes PayableAccounts PayableLIABILITIESCreditors claims on assetsA 11 - 22EQUITYOwners Claim

15、s on AssetsA 11 - 23TRANSACTION ANALYSIS EQUATION The accounting equation MUST remain in balance after each transaction.LiabilitiesEquityAssets=+P 11 - 24TRANSACTION 1: INVESTMENT BY OWNERSThe accounts involved are:(1) Cash (asset)(2) Owner Capital (equity) On December 1, Chas Taylor invests $30,000

16、 cash to start a consulting business.P 11 - 25TRANSACTION 2: PURCHASESUPPLIES FOR CASHThe accounts involved are:(1) Cash (asset)(2) Supplies (asset) Chas Taylors company, FastForward purchases supplies paying $2,500 cash.P 11 - 26TRANSACTION 3: PURCHASEEQUIPMENT FOR CASHThe accounts involved are:(1)

17、 Cash (asset) (2) Equipment (asset) FastForward purchases equipment for $26,000 cash.P 11 - 27TRANSACTION 4: PURCHASESUPPLIES ON CREDITThe accounts involved are:(1) Supplies (asset)(2) Accounts Payable (liability)FastForward purchases Supplies of $7,100 on account.P 11 - 28TRANSACTION 5: PROVIDESERV

18、ICES FOR CASHThe accounts involved are:(1) Cash (asset) (2) Revenues (equity) The company provides consulting services receiving $4,200 cash.P 11 - 29TRANSACTION 6 AND 7: PAYMENTOF EXPENSES IN CASHThe accounts involved are:(1) Cash (asset) (2) Expenses (equity) The company pays $1,000 rent and $700

19、in salary to the companys only employee.P 11 - 30SUMMARY OF TRANSACTIONSOther transactions were executed during December and the summary of all transactions is shown below:P 11 - 31FINANCIAL STATEMENTSLets prepare the financial statements reflecting the transactions we have recorded.P 21 - 32The inc

20、ome statement describes a companys revenues and expenses along with the resulting net income or loss over a period of time due to earnings activities.INCOME STATEMENTP 21 - 33 STATEMENT OF OWNERS EQUITYP 21 - 34The Balance Sheet describes a companys financial position at a point in time.BALANCE SHEE

21、TP 21 - 35STATEMENT OF CASH FLOWSP 21 - 36DECISION ANALYSISReturn on assets (ROA) is stated in ratio form as income divided by assets invested.Net incomeAverage total assetsReturn on assets =A 21 - 371A RETURN AND RISK ANALYSISA 3Many different Many different returns may be returns may be reported.reported.ROAInterest return on savings ac